Dec. 28 (Bloomberg) -- The Canadian dollar weakened to a month low on concern U.S. lawmakers will fail to reach an agreement to avert spending cuts and tax increases that may push the nation’s biggest trading partner into recession.
The currency has gained 2.4 percent this year versus its U.S. counterpart, erasing last year’s 2.3 percent loss. The currency fell against the majority of its most traded peers as U.S. President Barack Obama stood by his demand to allow tax increases for Americans with annual incomes above $250,000 in a meeting with Congressional leaders to avert some of the effects of tax and spending changes set to begin in January.
“Everybody is sitting on their hands waiting for some sort of a conclusion on this fiscal cliff discussion,” said Aaron Fennell, a futures specialist at Bank of Nova Scotia’s ScotiaMcLeod unit, by phone from Toronto. “It doesn’t really matter what happens, but once we have more details, more information, then traders can start coming into the market.”
The loonie, as the Canadian dollar is known for the picture of the aquatic bird on the C$1 coin, fell 0.2 percent to 99.70 cents per U.S. dollar at 5 p.m. in Toronto. One loonie buys $1.003.
Crude oil, the country’s biggest export, fell 0.1 percent to $90.80 per barrel in New York. The Standard & Poor’s 500 Index fell 1.1 percent.
Canada’s 10-year government bonds rose, with yields falling 0.03 basis points, or 0.03 percentage point, to 1.77 percent. The 2.75 percent security due in June 2022 gained 22 cents to C$108.48.
“Markets are concerned about the U.S. and the fiscal cliff and nothing being resolved,” David Bradley, director of foreign-exchange trading in Toronto at Scotia Capital Inc. unit of the Bank of Nova Scotia, said by phone from Toronto. “Just watch out for headlines and see how that moves equities, and that’s what should impact the Canadian dollar.”
The Canadian economy is expected to grow 1.8 percent next year, its slowest rate since the 2009 recession, according to a survey of 29 economists by Bloomberg news.
Futures traders decreased bets that the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop, known as net longs, was 63,352 on Dec. 25, compared with 74,278 a week earlier.
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